Today I will depart for the United States to attend the G20 Finance Ministers' Meeting and the IMF and World Bank Spring Meetings in Washington DC. I will also hold meetings with senior executives from the financial sector in New York.
These meetings provide an opportunity to take the temperature of the global economy, and will provide valuable insights to inform Budget preparations at home. They come amid economic uncertainty in a number of key regions around the world and significant Budget challenges at home, including large revenue downgrades in the near term.
The IMF's April 2011 World Economic Outlook (WEO) released overnight says emerging economies will continue to underpin global growth, forecast at 4.4 per cent this year and 4.5 per cent in 2012, but warns of key downside risks to the outlook.
The tragic events in Japan, political instability in North Africa and the Middle East, and persisting sovereign debt concerns in Europe continue to cloud the global economic horizon.
I will discuss with my international colleagues the implications of these challenges for international growth, and also the implications for the Australian economy.
These shared global risks come on top of unique domestic challenges we face at home. Our devastating summer of natural disasters means that Australia's economic growth will be impacted in the short term, as will the Budget from reconstruction spending and lower tax receipts. Treasury's analysis to date indicates that the combined impact of natural disasters at home and abroad could cut Australia's economic growth by up to ¾ of a percentage point in 2010-11.
This doesn't alter the Government's commitment to return the Budget to surplus in 2012‑13 – well ahead of any major advanced economy – which is the right strategy for an economy as it pushes towards capacity in the years ahead.
Despite the challenges for our economy in the short term, our fundamentals remain strong with low unemployment and a bumper investment pipeline. The IMF projects growth for the Australian economy of 3.0 per cent this calendar year and 3.5 per cent in 2012.
The IMF also notes in the WEO that unemployment in many economies continues to be high, forecasting an average unemployment rate in advanced economies of 7.8 per cent in 2011 and 7.4 per cent in 2012.
This highlights the importance of focussing on secure and sustainable employment across the world – creating more jobs as well as rebalancing global growth.
Australia's labour market is performing well in contrast to most advanced economies, with unemployment standing at 4.9 per cent.
It is a great achievement to have an unemployment rate with a ‘4' in front of it, despite recent natural disasters, and reflects the Gillard Government's sound economic management during the global financial crisis and in the recovery.
12 April 2011